Holiday Retail Sales: A Mixed Forecast

With the final quarter of the year fast-approaching — including the much-anticipated holiday season — forecasts for retail sales are beginning to pile up.

The Retail SPDR (XRT[1]) and Market Vectors Retail ETF (RTH[2]) are both beating the broader market so far this year despite some second-quarter weakness and spending concerns — and holiday retail sales will likely determine whether that run can continue.

The shopping period surrounding Christmas is crucial for retailers, as it accounts for as much as 40% of annual sales.

With that in mind, let’s take a look at various retail sales, hiring and company forecasts in the lead-up.

Consulting firm Deloitte says sales will rise between 4% and 4.5%[3] from November to January — in line with the gain seen last year and one of the sunnier forecasts out there. ShopperTrak, on the other hand, recently forecast a 2.4% year-over-year improvement[4] — not quite as good news for names stores like Gap (GPS[5]) and Guess (GES[6]).

Michael Niemira, the chief economist of the International Council of Shopping Centers, falls more on the optimistic side of things, though, predicting a rise of 3% to 3.5% for holiday sales[7] — “not a gangbuster season, by any means, but not a dismal one either,” he said.

But Adrienne Tennant — a retail analyst for Janney Montgomery Scott — said in an interview that she believes things will be ugly, and maintains that a flat season would actually be something to cheer about. More specifically, she expects trouble for teen retailers, including the big three of Abercromie & Fitch (ANF[8]), Aeropostale (ARO[9]) and American Eagle (AEO[10]).

One ray of sunshine: Walmart (WMT[11]) — despite a recently lowered outlook and complaints about low traffic — plans to hire 55,000 seasonal workers[12] for the coming season. The world’s largest retailer also is going to move more than 35,000 workers from temporary to part-time and the same amount of part-time to full-time.

Kohl’s (KSS[13]) plans to hire more than 50,000 seasonal workers as well. The bad news, though, is that holiday hiring overall is expected to fall 8% year-over-year to 700,000 employees — a drop following the 14% increase of 2012.

That’s bad news for JCPenney (JCP[14]) and Bon-Ton (BONT[15]) considering both stocks already are struggling[16] … and should fare even worse amid a bleak retail landscape.

Macy’s (M[17]) also says it has been struggling as consumers focus more on big-ticket durable goods[18] and less on apparel. That’s good news for companies like Best Buy (BBY[19]) and Hhgregg (HGG[20]), though.

Specialized brands might not be dependent on broader holiday retail sales, but instead could live or die by their individual inventories, promotions and so on. Urban Outfitters (URBN[21]), L Brands (LTD[22]) and Express (EXPR[23]) have momentum heading into the all-important season, while Francesca’s (FRAN[24]) and Lululemon (LULU[25]) have hit some bumps.

Looking at luxury specifically, Michael Kors (KORS[26]) is also going strong, with its full-year and fourth-quarter estimates marching upward in recent months. Expectations for Q4 and fiscal 2013 have been falling for Saks (SKS[27]), but mixed for Tiffany & Co. (TIF[28]).

As of this writing, Alyssa Oursler was long RTH. Follow her on Twitter at @alyssaoursler[29].